1996 Missouri FFA
Farm Management Contest
Multiple Choice Section
The Farm Management Contest is designed to test student
understanding of the application of economic principles in farm
management. Each question is worth three (3) points.
Please place your answers in the appropriate box on the score
sheet provided. There is only one correct answer to each
question.
1. For tax year 1995, the social security wage base was
A. $17,500
B. $35,800
C. $50,000
D. $61,200
E. None of the above
2. A farmer purchases 500-pound feeder steers for 60 cents per pound
and plans to sell the steers at 800 pounds. The farmer
estimates the total cost of gain to be 55 cents per pound. The
nearest breakeven price when the steers are sold at 800
pounds is
A. 58.13 cents/pound
B. 64.75 cents/pound
C. 73.42 cents/pound
D. 76.78 cents/pound
E. None of the above
3. How many total acres are included in "SW 1/4 of NE 1/4 and NE
1/4 of SW 1/4 of Section 15, Twp. 10N, R4W of the 5th
Principle Meridian"?
A. 80 acres
B. 120 acres
C. 160 acres
D. 320 acres
E. None of the above
4. How much perimeter fence would be required to completely
enclose the parcel of land described in question 3?
A. 1.0 mile
B. 1.5 miles
C. 2.0 miles
D. 2.5 miles
E. None of the above
5. The nearby hog futures contract closed at $50.85 with a local
basis of $1.05 over the board. The local cash market was
A. $47.95
B. $49.80
C. $50.00
D. $51.90
E. None of the above
6. A soybean producer decides to store his soybeans in the local
elevator for three months. The price at harvest is $6.00 per
bushel and the elevator charges 2 cents per bushel per month for
storage plus a 5 cents per bushel handling charge. He has 5,000
bushels to sell and must borrow $30,000 at 8% annual interest
while he stores the soybeans. What price must he receive for
his soybeans to break even and cover his storage and
opportunity costs?
A. $6.23
B. $6.32
C. $6.39
D. $6.44
E. None of the above
7. A farmer is purchasing a new baler at a cost of $24,000. His
dealer will finance the baler under the following terms: 10%
down payment with the balance repaid in equal payments over
the next five years at 8% APR. The farmer expects the baler
to last for 7 years and have a salvage value of $5,000. How
much interest will the farmer pay the first year of the loan?
A. $1,728
B. $2,340
C. $2,800
D. $3,120
E. None of the above
8. An increase in the value of the U.S. dollar relative to the
currency of other countries should result in
A. more costly imports.
B. less costly imports.
C. increased exports.
D. no effect on imports or exports.
E. None of the above
9. If the interest rate is 10%, what is the present value of a
dollar to be received by a producer two years from now?
A. $0.826
B. $0.900
C. $1.100
D. $1.210
E. None of the above
10. Farmer Jones has $10,000 in equipment he uses exclusively for
corn. He assumes that this equipment will last 4 years and
have a salvage value of $0. He plans to plant 100 acres of
corn each year. Assuming an interest rate of 8%, what will
be his average fixed costs per year for the next 4 years
(depreciation and interest) for this machinery per acre of
corn?
A. $10
B. $20
C. $25
D. $29
E. None of the above
11. In 1995, Pat Parker had net farm income of $35,000. Pat had
total business assets of $760,000 and total liabilities of
$450,000. Pat paid $32,000 in interest. Rate of return on
equity for 1995 would be
A. 8.5%
B. 11.3%
C. 12.8%
D. 14.0%
E. None of the above
12. The maximum amount that can be claimed as a Section 179
expense deduction on your 1995 tax return is
A. $5,000
B. $10,000
C. $15,000
D. $17,500
E. None of the above
13. How many pounds of 48% protein supplement must be mixed with
7% protein corn to make a ton of 16% protein feed?
A. 321 pounds
B. 400 pounds
C. 439 pounds
D. 487 pounds
E. None of the above
14. A feedlot operator buys feeder steers, finishes them, and
sells them. The operator estimates that finished steers will
sell for $63 per cwt. and that it will cost $230 per head to
bring them from the 750 pound purchase weight to the 1100
pound selling weight. What is the highest price the operator
can pay for 750 pound feeder steers to break even?
A. $61.73/cwt.
B. $70.25/cwt.
C. $76.14/cwt.
D. $82.50/cwt.
E. None of the above
15. What will the breakeven bid price for 750 pound feeder steers
be in the above question if high priced corn causes feeding
costs to increase to $315 per head?
A. $54.00/cwt.
B. $62.45/cwt.
C. $66.14/cwt.
D. $378/head
E. None of the above
16. A $1 deductible expense (before tax) will cost ______ after
tax if the farmer's marginal tax rate is 40%.
A. $0.00
B. $0.40
C. $0.60
D. $1.00
E. None of the above
17. The demand curve shows the relationship between
A. consumer tastes and the quantity demanded.
B. price and the quantity demanded.
C. price and production costs.
D. money income and quantity demanded.
E. None of the above
18. Liability of a limited partner in a limited partnership is
limited to
A. all debts and obligations of partnership up to the
amount of his investment in the partnership.
B. maximum of 50% of obligations of the partnership.
C. all debts and obligations of the partnership.
D. all debts and obligations of the partnership up to
double the amount of his investment in the
partnership.
E. None of the above
19. Your ability to pay all debts if you liquidate your business
is called
A. current ratio.
B. equity.
C. solvency.
D. investment ratio.
E. None of the above
20. A $50,000 loan is amortized at 8% interest for 7 years yields
annual payments of $9,604.30. How much of the first year's
payment is principal?
A. $4,000.00
B. $4,604.30
C. $5,604.30
D. $9,604.30
E. None of the above
21. For the above loan of $50,000, if the seventh and final
payment includes $711.43 of interest, what was the
outstanding principal balance after the sixth payment?
A. $8,181.44
B. $8,892.87
C. $9,604.30
D. $10,315.73
E. None of the above
22. For the above loan of $50,000, how much total interest is
paid over the life of the loan?
A. $4,980.01
B. $17,230.10
C. $28,000.00
D. $67,230.10
E. None of the above
23. A part-time farmer has 160 acres of land, 40 cows and can
only work 400 hours per year on his farm. An acre of corn
requires 3 hours of labor and yields 80 bushels. An acre of
beans take 2.2 hours and yields 30 bushels. Each cow needs 7
hours of labor, 3 acres of land, and consumes 16 bushels of
corn. What is the maximum number of acres of soybeans he can
grow if the farmer keeps 40 cows and does not buy any corn?
A. 32
B. 64
C. 94
D. 104
E. None of the above
24. A vicious cold spell in the late spring has wiped out the
buds on the peach trees grown in Georgia, a major peach
producing state. How will this freeze impact the price
received for peaches by Maryland peach producers?
A. No effect -- Georgia is too far away to have any
impact on Maryland.
B. Will lower the price because the demand for peaches
will be lower.
C. Because of the reduced supply, prices for peaches in
Maryland will tend to move upward.
D. No effect -- Maryland does not grow enough peaches to
have any impact on prices.
E. None of the above
25. The primary purpose of the current ratio is to
A. determine tax liabilities.
B. determine short-run farm profitability.
C. determine the current relationship of production and
marketing activities.
D. determine ability to meet immediate financial
obligations.
E. None of the above
26. During the year, a farmer pays $1,800 principal and $500
interest on a tractor loan. His annual depreciation is
$2,000. His deductible operating expenses (fuel, oil,
repairs, etc) associated with operating the tractor totaled
$500. His marginal tax rate is 25%. What is his after-tax
cost of using the tractor for the year?
A. $ 750
B. $2,100
C. $2,050
D. $3,600
E. None of the above
27. Liquidity is best described as
A. the ability to meet cash obligations as they come
due.
B. total assets minus total liabilities.
C. having no long-term debt.
D. the rate of capital turnover.
E. None of the above
28. A farmer has total assets of $500,000 of which land is
$300,000. The farmer's debt:equity ratio is 1.0. What will
the farmer's debt:equity ratio be if the value of land
inflates by 10%?
A. 0.89
B. 0.93
C. 0.97
D. 1.12
E. None of the above
29. If the U.S. wheat industry has an inelastic demand curve, a
reduction in the amount of wheat supplied to the market would
A. have no effect on total revenues in the wheatindustry.
B. increase the total revenues in the wheat industry.
C. decrease the total revenues in the wheat industry.
D. cause a sharp increase in the demand for wheat.
E. None of the above
30. A farmer traded a tractor with an adjusted tax basis of
$5,000. The new tractor had a list price of $50,000. The
dealer allowed a $15,000 trade-in for the old tractor. The
farmer paid $10,000 of his own money and borrowed $25,000 to
pay the balance. What is the tax basis of the new tractor?
A. $15,000
B. $35,000
C. $40,000
D. $50,000
E. None of the above
31. Wheat yields 40 bushels per acre and the price is $4.00 per
bushel. The price of canola is $0.10 per pound. The cost of
production is $140 per acre for wheat and $150 per acre for
canola. What yield would be needed from canola to give the
same net returns as wheat?
A. 1,255 pounds
B. 1,545 pounds
C. 1,600 pounds
D. 1,700 pounds
E. None of the above
32. A grain farmer who normally stores his soybeans at a local
elevator has decided to use the options market to create a
synthetic storage. To do so he will sell his beans at
harvest and
A. buy a put option.
B. sell a put option.
C. buy a call option.
D. sell a call option.
E. None of the above
33. If the grain farmer in the above problem suffers a loss on
his options contract, then this loss will be taxed as
A. an ordinary loss.
B. a capital loss.
C. a non-deductible farm expense.
D. a personal expense.
E. None of the above
34. On November 10 John bought 200 head of steers at $67.00 per
cwt. The futures market on that day quoted $70.00 per cwt.
on an April contract. John expects the cash price to be
about $60.00 per cwt. in April when he plans to sell his
steers. On November 10 John should
A. wait until April to sell a futures contract.
B. buy an April futures contract.
C. wait until April to buy a futures contract.
D. sell an April futures contract.
E. None of the above
35. A patronage dividend is
A. paid to stockholders of large companies out of the
company's profits.
B. a refund made to members of a cooperative and is
based upon their volume of business with the
cooperative.
C. a form of rent paid to a landlord in exchange for
pasture land.
D. the interest earned on a savings account.
E. None of the above
36. A written agreement by which an owner of property transfers
title to someone for the benefit of beneficiaries is a
A. trust.
B. partnership.
C. corporation.
D. sole proprietorship.
E. None of the above
37. A farmer has a debt : worth ratio of 2 : 1. The current
liabilities total $50,000 and the non-current liabilities
total $90,000. What is the value of the assets?
A. $280,000
B. $210,000
C. $140,000
D. $70,000
E. None of the above
38. A cattle feeding operation has sales of $60,000, feed
purchases of $40,000, other costs of $2,000, an opening
inventory of $40,000, and a closing inventory of $32,000.
What is the net farm income for this operation on an accrual
basis?
A. $2,000
B. $10,000
C. $18,000
D. $20,000
E. None of the above
39. Which of the following is considered Schedule F farm income?
A. Cull breeding stock
B. Crop sales
C. Sales of farm equipment
D. Sale of land
E. Both A & B
40. A farmer who wants to have the right, but not the obligation,
to sell a particular commodity at a specified price level,
would use a
A. cash forward contract.
B. basis contract.
C. call option.
D. put option.
E. None of the above
41. If corn silage as fed contains 62% moisture and 2.5% protein,
the dry matter would be what percent protein?
A. 2.80
B. 3.08
C. 5.71
D. 6.58
E. None of the above
42. On May 1, 1995, Jill borrowed $25,000 to buy feeder calves.
On Oct. 1, 1995, she repaid the $25,000 along with $1015.62
interest. What annual interest rate did she pay?
A. 9.75%
B. 10.97%
C. 11.75%
D. 12.25%
E. None of the above
43. The main difference between cash and accrual accounting is
that accrual accounting includes
A. a charge for unpaid family labor.
B. depreciation.
C. an adjustment for changes in inventory.
D. sales of capital assets.
E. None of the above
44. A producer sells 9 feeder steers for $58/cwt. The average
weight per steer is 700 pounds. There is a 2.5% sales
commission and yardage fees of $2.30 per head. The net
amount received for the pen of steers would be
A. $3,541.95
B. $4,156.20
C. $4,240.80
D. $4,618.00
E. None of the above
45. The capitalized value of land that yields $50 per year in net
returns to land is $__________ if the interest rate is 8%.
A. $50
B. $400
C. $500
D. $625
E. None of the above
46. The price of widgets changes from $100 to $90 and, as a
result, the quantity demanded increases from 50 to 60 units.
From this we can conclude that
A. the demand for widgets is elastic.
B. the demand for widgets is inelastic.
C. the demand for widgets is of unit elasticity.
D. the demand for widgets has declined.
E. None of the above
47. During the last 12 months, Mr. Jackson has had cash receipts
of $15,000 and cash outlays of $14,000. Which of the
following statements is correct?
A. Mr. Jackson had a net farm income of $1,000.
B. Mr. Jackson's net worth increased by $1,000.
C. Mr. Jackson had a positive cash flow of $1,000.
D. Mr. Jackson had a depreciation charge of $1,000.
E. None of the above
48. In analysis of a farm, what would you do if a cash flow
projection indicated that there would be more expense than
income in a certain month?
A. Terminate the enterprise causing the cash flow
problem that month.
B. Use savings, delay expenses, move up sales, or borrow
money.
C. Change from cash to accrual accounting method.
D. Change depreciation methods.
E. None of the above
49. Partial budgeting permits a farm manager to
A. calculate profit for the entire farm business.
B. calculate the change in profit from a proposed change
which does not affect the entire farm organization.
C. calculate the change in profit from a proposed change
which affects the entire farm organization.
D. calculate total profit from a single enterprise.
E. None of the above
50. A farmer wants to know the rate of return earned on an
investment. The net worth is $200,000 and liabilities are
$100,000. The return to farm capital is $30,000. What is
the rate of return on the investment?
A. 5%
B. 10%
C. 20%
D. 30%
E. None of the above
_____________________________________________________________________
1996 MISSOURI FFA FARM MANAGEMENT CONTEST
Problems Section
For the following problems, place your answer for each question
in the corresponding numbered space on the answer sheet.
Computations may be done in the margins or on the back of the
paper. Each question is worth four (4) points. There is only
one correct answer for each question.
PROBLEM I - Balance Sheet
The Farm Financial Standards Task Force has recommended that farm
balance sheets be prepared with two time classifications --
current and non-current. Items that had been classified as
Intermediate or Long-term are now classified as non-current.
Using the information below, complete the net worth statement for
January 1, 1996:
Land . . . . . . . . . . . . . . . . . . . . . . . . $375,000
Autos . . . . . . . . . . . . . . . . . . . . . . . 31,000
Machinery and equipment. . . . . . . . . . . . . . . 95,000
Cows . . . . . . . . . . . . . . . . . . . . . . . . 60,000
Calves . . . . . . . . . . . . . . . . . . . . . . . 35,000
Sows and boars . . . . . . . . . . . . . . . . . . . 25,000
Market hogs . . . . . . . . . . . . . . . . . . . . 62,000
Checking and savings . . . . . . . . . . . . . . . . 9,415
House. . . . . . . . . . . . . . . . . . . . . . . . 96,000
Hog buildings . . . . . . . . . . . . . . . . . . . 105,000
Feed and hay . . . . . . . . . . . . . . . . . . . . 14,250
Accrued interest owed. . . . . . . . . . . . . . . . 13,750
Accrued taxes owed . . . . . . . . . . . . . . . . . 7,400
30-year land loan balance is $220,000.
$9,000 plus interest is due March 1 of each year.
7-year building loan balance is $41,000.
$11,000 plus interest is due August 31 of each year.
20-year home loan balance is $62,500.
$3,500 plus interest is due each December 1.
Current Assets: Current Liabilities:
___________________________ ___________________________
___________________________ ___________________________
___________________________ ___________________________
___________________________ ___________________________
___________________________ ___________________________
___________________________ ___________________________
___________________________ ___________________________
___________________________ ___________________________
___________________________ ___________________________
___________________________ ___________________________
___________________________ ___________________________
Total _________________ Total __________________
Non-current Assets: Non-current Liabilities:
___________________________ ___________________________
___________________________ ___________________________
___________________________ ___________________________
___________________________ ___________________________
___________________________ ___________________________
___________________________ ___________________________
___________________________ ___________________________
___________________________ ___________________________
___________________________ ___________________________
___________________________ ___________________________
Total _________________ Total __________________
Total Assets ______________ Total Liabilities _________
Net Worth _________________
Questions 1 through 7 refer to PROBLEM I
1. The total value of current assets on January 1, 1996, was:
A. $120,665
B. $145,665
C. $151,665
D. $162,415
E. None of the above
2. The total value of non-current assets was:
A. $702,000
B. $727,000
C. $787,000
D. $801,250
E. None of the above
3. The total value of current liabilities was:
A. $21,150
B. $30,150
C. $41,150
D. $52,415
E. None of the above
4. The total value of non-current liabilities was:
A. $241,000
B. $300,000
C. $303,500
D. $323,500
E. None of the above
5. The net worth was:
A. $442,665
B. $465,415
C. $500,515
D. $563,015
E. None of the above
6. The current ratio was:
A. 0.370
B. 2.302
C. 2.702
D. 5.705
E. None of the above
7. The debt to worth ratio was:
A. 0.533
B. 0.612
C. 0.745
D. 1.633
E. None of the above
PROBLEM II -- Enterprise Budget
Use the following corn budget to answer Questions 8 through 16.
_________________________________________________________________
CORN FOR GRAIN--CIRCULAR SPRINKLER SYSTEM, 32,000 seed population
20" Water, Custom Harvest (Combine & Hauling)
Shallow Electric 50 ft. Well, 30 ft. Lift, 900 GPM
Operating Inputs Units Price Quantity Value
Corn seed Lbs 1.40 21.30 29.82
Nitrogen (N) Lbs 0.25 215.00 53.75
Phosph (P205) Lbs 0.11 50.00 5.50
Custom harvest Ac 19.00 1.00 19.00
Custom hauling Cwt 0.11 180.00 19.80
Rent fert spread/ac Ac 2.44 3.00 7.32
Pre-plant insecticide Ac 22.80 1.00 22.80
Post-plant insecticide Ac 21.60 1.00 21.60
Pre-emerge herb (Bicep) Ac 17.34 1.00 17.34
Post-emerg herb Ac 18.12 1.00 18.12
Annual operating capital Dol .106 70.00 7.47
Machinery labor Hr 6.00 1.96 11.76
Irrigation labor Hr 6.00 0.96 5.76
Mach. fuel, lube, repair Dol 16.39
Mach. fuel, lube, repair Dol 39.00
Total Operating Costs 295.43
____________________________________
Fixed Costs Amount Value
Machinery
Interest @ 10.675% 145.54 15.54
Depr, taxes, insurance 16.89
Irrigation
Interest @ 10.675% 234.19 25
Depr, taxes, insurance 26
Total Fixed Costs 83.43
______________________________________
Production Units Price Quantity Value
Corn Bu 2.50 180.00 450.00
Total Receipts 450.00
_______________________________________
Returns above total operating costs 154.57
Returns above all specified costs 71.14
________________________________________________________________
8. Total operating cost per acre is:
A. $71.14
B. $154.57
C. $295.43
D. $450.00
E. None of the above
9. The return above total operating cost per acres is:
A. $71.14
B. $83.43
C. $154.57
D. $450.00
E. None of the above
10. How many hours of labor are budgeted per acre?
A. 0.96
B. 1.96
C. 2.92
D. 17.52
E. None of the above
11. What is the total budgeted interest cost per acre?
A. $15.54
B. $23.26
C. $40.54
D. $48.01
E. None of the above
12. What price per pound is paid for nitrogen fertilizer?
A. 11 cents
B. 25 cents
C. 54 cents
D. 215 cents
13. What are the per acre costs attributable to irrigation?
A. $44.76
B. $45.27
C. $95.76
D. $234.19
E. None of the above
14. How many pounds of fertilizer are applied per acre?
A. 215
B. 265
C. 360
D. 365
E. None of the above
15. What will be the net per acre value of the landlord's share
if she receives half of the crop and pays for half of the
seed, fertilizer (including spreading), chemicals and
irrigation fuel, lube & repairs? (ignore cost of operating
capital)
A. $9.75
B. $107.62
C. $117.37
D. $225.00
E. None of the above
16. If the price of corn increases to $3.40 per bushel, what will
be the per acre receipts above total operating costs?
A. $233.14
B. $316.57
C. $413.88
D. $612.00
E. None of the above
PROBLEM III -- Income Tax Management
Use the following tax tables to answer questions 17 through 22.
ANNUAL DEPRECIATION PERCENTAGES FOR 5-YR PROPERTY, 150% DB
_________________________________________________________________
MID-QUARTER CONVENTION
Tax MID-YEAR Quarter placed in service --
Year CONVENTION 1 2 3 4
1 15.000% 26.250% 18.750% 11.250% 3.750%
2 25.500 22.125 24.375 26.625 28.875
3 17.850 16.520 17,062 18.637 20.212
4-5 16.660 16.520 16.763 16.567 16.404
6 8.330 2.065 6.287 10.354 14.355
Total 100.000 100.000 100.000 100.000 100.000
_________________________________________________________________
ANNUAL DEPRECIATION PERCENTAGES FOR 7-YR PROPERTY, 150% DB
_________________________________________________________________
MID-QUARTER CONVENTION
Tax MID-YEAR Quarter placed in service --
Year CONVENTION 1 2 3 4
1 10.714% 18.750% 13.393% 8.036% 2.679%
2 19.133 17.411 18.559 19.707 20.854
3 15.033 13.680 14.582 15.484 16.386
4 12.249 12.160 12.221 12.275 12.874
5-7 12.249 12.160 12.221 12.275 12.182
8 6.124 1.520 4.582 7.673 10.661
Total 100.000 100.000 100.000 100.000 100.000
_________________________________________________________________
ANNUAL FRACTIONS FOR STRAIGHT LINE OVER N YEARS (N less than 26)
_________________________________________________________________
MID-QUARTER CONVENTION
Tax MID-YEAR Quarter placed in service --
Year CONVENTION 1 2 3 4
1 1/2 7/8 5/8 3/8 1/8
2-N 1 1 1 1 1
N+1 1/2 1/8 3/8 5/8 7/8
_________________________________________________________________
Depreciation formula: Basis divided by N times number from above
table.
ANNUAL FRACTIONS FOR 27 1/2 YEAR PROPERTY, REGULAR MACRS
_________________________________________________________________
Tax Month Placed in Service --
Year 1 2 3 4 5 6 7 8 9 10 11 12
1 11.5 10.5 9.5 8.5 7.5 6.5 5.5 4.5 3.5 2.5 1.5 0.5
2-27 12 12 12 12 12 12 12 12 12 12 12 12
28 6.5 7.5 8.5 9.5 10.5 11.5 12 12 12 12 12 12
29 -- -- -- -- -- -- 0.5 1.5 2.5 3.5 4.5 5.5
_________________________________________________________________
Depreciation formula: Basis divided by 27 1/2 divided by 12
times number from above table.
ANNUAL FRACTIONS FOR 39 YEAR PROPERTY, REGULAR MACRS
_________________________________________________________________
Tax Month Placed in Service --
Year 1 2 3 4 5 6 7 8 9 10 11 12
1 11.5 10.5 9.5 8.5 7.5 6.5 5.5 4.5 3.5 2.5 1.5 0.5
2-39 12 12 12 12 12 12 12 12 12 12 12 12
40 0.5 1.5 2.5 3.5 4.5 5.5 6.5 7.5 8.5 9.5 10.5 11.5
_________________________________________________________________
Depreciation formula: Basis divided by 39 divided by 12 times
number from above table.
On April 5, 1995, Sam traded corn planters. The old planter had
a remaining undepreciated value of $4,812. Sam paid $15,000
"boot" in the trade for the new planter.
17. The planter is:
A. 3-year property
B. 5-year property
C. 7-year property
D. 10-year property
E. None of the above
18. If Sam does not expense any of the cost of the planter, then
1995 depreciation will be (use regular MACRS and mid-year
convention):
A. $1,607.10
B. $2,122.66
C. $2,971.80
D. $3,288.50
E. None of the above
19. If Sam expenses the maximum on the planter trade, and uses
the mid-quarter convention and regular MACRS, then 1995
depreciation will be:
A. $309.65
B. $433.50
C. $644.47
D. $902.25
E. None of the above
20. If Sam does not expense and uses the mid-year convention and
straight line depreciation over the alternate MACRS life, his
1995 depreciation will be:
A. $ 990.60
B. $1,415.14
C. $1,981.20
D. $2,830.29
E. None of the above
21. In order to use the mid-quarter convention, at least ______
percent of Sam's 1995 purchases of depreciable property must
have been made in the fourth quarter.
A. 60%
B. 50%
C. 40%
D. 33%
E. None of the above
22. Under MACRS, a swine farrowing house is classified as
A. 7-year property
B. 10-year property
C. 15-year property
D. 20-year property
E. None of the above
PROBLEM IV -- Supply and Demand
(See graph)
The above graph represents the current supply of wheat in the
U.S. (S), the expected supply of wheat once the CRP program ends
later this decade (S1), the foreign demand for U.S. wheat (DF),
the domestic demand for U.S. wheat (DUS), and the total demand
for U.S. wheat (DT).
For questions 23-25, use the current wheat supply (S).
23. What is the market equilibrium price of wheat in the U.S.?
A. P1
B. P2
C. P3
D. P4
E. None of the above
24. At the market equilibrium price, how much wheat will be used
in the U.S.?
A. Q1
B. Q2
C. Q3
D. Q4
E. Q5
25. At the market equilibrium price, how much wheat will be
exported?
A. Q1
B. Q2
C. Q3
D. Q4
E. Q5
26. Without foreign demand, the equilibrium price of wheat would
be
A. P1
B. P2
C. P3
D. P4
E. None of the above
For questions 27 and 28, assume the CRP program ends and the
wheat supply increased from S to S1.
27. The change in supply will cause the market equilibrium price
to
A. increase.
B. decrease.
C. not change.
D. None of the above
28. After the end of CRP, U.S. wheat exports should
A. increase.
B. decrease.
C. stay the same.
D. None of the above
PROBLEM V - Marketing
On May 25, a farmer buys 300 head of feeder pigs. He sells them
as slaughter hogs on October 5. Ignore commissions, and
interest.
May 25 quotes: October 5 quotes:
October futures price = $46.80 October futures price = $43.50
Expected basis = $0.50 under Basis = $0.25 over the board
the board
Strike --- Premiums --- --- Premiums ---
price Call Put Call Put
$42.00 $6.05 $0.55 $2.40 $0.21
$44.00 $4.35 $1.15 $0.90 $1.12
$46.00 $3.10 $1.85 $0.45 $2.98
$48.00 $2.10 $2.75 $0.07 $4.71
$50.00 $1.37 $4.00 $0.02 $6.55
29. What is the cash price of hogs on October 5?
A. $43.20
B. $43.25
C. $43.50
D. $43.75
E. None of the above
30. If the farmer sold a futures contract on May 25 and bought
back the contract on October 5, what would be the realized
price per hundredweight (cash + net on futures) for these
hogs?
A. $43.25
B. $43.75
C. $46.55
D. $47.05
E. None of the above
31. If the farmer bought a $46.00 Put on May 25 and sold the Put
on October 5, what would be the realized price per
hundredweight (cash + net on options) for his hogs?
A. $42.12
B. $42.62
C. $44.38
D. $44.88
E. None of the above
32. If the farmer bought a $46.00 Put and sold a $46.00 Call on
May 25, and sold the Put and bought back the Call on October
5, what would be the realized price per cwt (cash + net
on options) for his hogs?
A. $43.95
B. $44.45
C. $47.03
D. $47.53
E. None of the above
33. Given all the information above, which of the following
actions taken on May 15 turned out to be the most
profitable?
A. Selling a futures contract.
B. Buying a $46 Put option.
C. Buying a $46 Put and selling a $46 Call.
D. Taking no market action.
PROBLEM VI - Diminishing Returns
Rich Farmer has 1,200 bushels of corn stored on his farm. He can
sell it at the local elevator for $4.00 per bushel. It will cost
him $.10 per bushel to haul it to the elevator. Rich is
considering feeding the corn to some hogs. He can buy 45 pound
feeder pigs for 90 cents per pound delivered to his farm.
Rich will grind and mix his own hog feed. His ration consists of
80 pounds of corn and 20 pounds of commercial feed additive. He
can get the commercial additive delivered for $240 per ton.
Rich plans to market the hogs at 255 pounds. He thinks it will
take 120 days of feeding to reach that weight. He expects a 3.8
to 1 feed conversion ratio.
34. How many pounds of corn does Rich have? (Hint: Corn weighs
56 pounds per bushel.)
A. 1,200
B. 5,600
C. 67,200
D. 84,000
E. None of the above
35. How much commercial feed additive will he need to buy to mix
with the 1,200 bushels of corn?
A. 16,800 pounds or 8.4 tons
B. 21,000 pounds or 10.5 tons
C. 28,000 pounds or 14 tons
D. 50,000 pounds or 25 tons
E. None of the above
36. Given the limited corn supply, how many pounds of gain (at
3.8 to 1) can Rich get if he feeds an 80-20 ration?
A. 22,150 pounds
B. 27,632 pounds
C. 29,474 pounds
D. 35,000 pounds
E. None of the above
37. How many feeder pigs should Rich buy (assuming a zero death
loss)?
A. 84
B. 105
C. 134
D. 166
E. 175
Rich decides to feed the pigs. He buys 100 head which average 44
pounds each. Five die and he sells 95 which average 257 pounds.
He has 120 bushels of corn left.
38. What feed conversion did Rich actually get?
A. 3.78 pounds of feed per pound of gain
B. 3.82 pounds of feed per pound of gain
C. 3.93 pounds of feed per pound of gain
D. 4.01 pounds of feed per pound of gain
E. None of the above
39. What is the total feed cost for these pigs?
A. $5,057.80
B. $5,575.20
C. $6,026.40
D. $8,219.50
E. None of the above
40. If Rich's costs (other than feed and pigs) were $25 per pig
purchased, what was Rich's breakeven selling price?
A. $41.20 per cwt.
B. $41.66 per cwt.
C. $46.05 per cwt.
D. $51.51 per cwt.
E. None of the above
PROBLEM VII - Partial Budgeting
Noah Hog is trying to increase his farm's income. He is
considering switching his 50-sow feeder pig production operation
to a 40-sow farrow-to-finish operation.
Currently, he figures it requires $400 of feed, $90 of labor, $17
of medicine, $27 in utilities, and $100 of equipment and supplies
per sow each year to produce feeder pigs. Noah has been
averaging sales of 14.5 pigs per sow for $45 per head.
For a farrow-to-finish operation, Noah estimates he will have the
above expenses, plus an additional $700 for feed, $50 for labor,
$5 for medicine, $4 for utilities, and $95 for equipment and
other costs per sow. Noah figures he can sell fourteen 250-pound
market hogs per sow for $45 per cwt.
Use the space below to determine if the change in enterprise
should be made.
Additional receipts:
Sale of slaughter hogs 41. $________
Reduced costs (10 sows):
Feed $________
Labor ________
Medicines ________
Utilities ________
Equip. & supplies ________
Subtotal 42. $________
Totals of additional receipts and reduced costs $________
Additional costs (40 sows):
Feed $________
Labor ________
Medicine ________
Utilities ________
Equip. & other ________
Subtotal 43. $________
Reduced receipts:
Feeder pigs 44. $________
Total additional costs and reduced receipts $________
Net change in income 45. $________
41. If Noah Hog makes the change, his additional receipts will
be
A. $63,000
B. $69,000
C. $74,600
D. $110,400
E. None of the above
42. Noah's reduced costs will be
A. $5,340
B. $6,340
C. $10,890
D. $12,107
E. None of the above
43. Noah's additional costs will be
A. $6,540
B. $19,620
C. $26,160
D. $34,160
E. None of the above
44. The expected reduced receipts are
A. $6,875
B. $13,380
C. $27,500
D. $32,625
E. None of the above
45. The net change in income is
A. a gain of $2,555.
B. a gain of $195.
C. a loss of $2,555.
D. a loss of $195.
E. None of the above
PROBLEM VIII -- Time Value of Money
Use the following information to answer Questions 46-50.
Present Future Present
Value of Value of Value of
N a $1 a $1 Annuity
1 0.913 1.095 0.913
2 0.834 1.199 1.747
3 0.762 1.312 2.509
4 0.696 1.437 3.205
5 0.635 1.575 3.840
6 0.580 1.724 4.420
46. A alfalfa field will produce $500 income during the first
year, $1,000 at the end of each year for the next 4 years and
$750 at the end of the sixth year. What is the present value
of this income stream?
A. $3,818.50
B. $4,676.50
C. $4,731.50
D. $5,589.50
E. None of the above
47. A beef cow produces after-tax returns at the end of the year
of $80/year for 5 years and can be sold for $400 at the end
of the fifth year. Assume the above table uses the
appropriate discount rate and determine the current value of
the cow.
A. $561.20
B. $624.70
C. $663.10
D. $836.50
E. None of the above
48. With two years of income remaining in a beef cow, how much
should she be worth using the above table?
A. $305.42
B. $473.36
C. $581.72
D. $606.81
E. None of the above
49. If the farmer expects interest rates to decrease, but no
decrease in net returns to cattle, what impact is this likely
to have on the present value of the beef cow?
A. Decrease the present value
B. Increase the present value
C. Would not change the present value
D. Cannot tell
50. If the average tax rate is expected to increase over the next
three years so that the cow no longer nets $80/year after
taxes. What impact would this have on your answer to question
47?
A. Increases the value
B. Decreases the value
C. No change in the value
D. Cannot tell
___________________________________________________________________
1996 STATE FFA FARM MANAGEMENT CONTEST
Key
Multiple Choice
1. D 11. B 21. B 31. D 41. D
2. A 12. D 22. B 32. C 42. A
3. A 13. C 23. A 33. B 43. C
4. C 14. A 24. C 34. D 44. A
5. D 15. D 25. D 35. B 45. D
6. A 16. C 26. C 36. A 46. A
7. A 17. B 27. A 37. B 47. C
8. B 18. A 28. A 38. B 48. B
9. A 19. C 29. B 39. B 49. B
10. D 20. C 30. C 40. D 50. B
Problems
1. A 11. D 21. C 31. D 41. A
2. C 12. B 22. B 32. D 42. B
3. E 13. C 23. D 33. C 43. D
4. B 14. B 24. B 34. C 44. D
5. D 15. C 25. A 35. A 45. A
6. C 16. B 26. B 36. E 46. A
7. B 17. C 27. B 37. B 47. A
8. C 18. B 28. A 38. A 48. B
9. C 19. C 29. D 39. C 49. B
10. C 20. A 30. D 40. E 50. B